Sustainable procurement of materials

How are products sourced ethically and how can sourcing and fair trade initiatives help businesses make their procurement activities more sustainable?

Each player must accept the cards that life deals him or her. But once in hand one must decide how to play the cards in order to win the game.

(Voltaire, French philosopher 1694-1778)

Defining the concept of ethical sourcing of products

With rising globalisation and the prevalence of extended supply chains, procurement has a key role in the establishment of sustainable supply chains and sustainable logistics practices in the current competitive global environment.

Businesses have to develop policies and practices that extend well beyond their own narrow boundaries (Meehan and Bryde 2011). According to the UK Chartered Institute of Purchasing and Supply (CIPS), ethical sourcing is:

…the process of ensuring the products being sourced are obtained in a responsible and sustainable way, that the workers involved in making them are safe and treated fairly and that environmental and social impacts are taken into consideration during the sourcing process.

In addition, ethical sourcing requires businesses to:

…respect international standards against criminal conduct and human rights abuses and respond to these issues immediately if identified. 

(CIPS 2009)

Today the majority of businesses that have adopted ethical sourcing principles have made significant improvements towards a more quality-based, customer-focused supply chain strategy and have turned their procurement activities into a strategic enabler that helps them to sustain in the current competitive global environment.

Sourcing locally

Local sourcing refers to the:

…sourcing, purchasing or procurement of food, ingredients and other consumable products from within a specific radius from where they will be used, or from a given geographical area.

(CfD 2016)

According to a study from the United States Department of Agriculture (USDA):

…definitions related to geographic distance between production and sales vary by regions, companies, consumers, and local food markets. (USDA 2010)

Local sourcing is typically led by consumers concerned about the freshness of food and the environmental impacts of transporting food from large distances. In addition, many retail businesses looking for more flexibility are working with local producers as these are generally capable of reacting to market requests faster and coordinate deliveries quicker. This way retailers gain greater control and reduce shipping and storage costs across their supply chains, and at the same time support local economies and minimise transport externalities.

On the other hand, a number of obstacles may limit local sourcing. These may include problems of availability, capacity and competitiveness in local supply markets and intensified competition from multinational corporations. Such issues of supplier capacity and competitiveness may be tackled by introducing policy interventions and the creation of supplier development policies (Crone 2002).

Fair trade schemes

Fair trade is an institutional arrangement that is designed to help producers in developing countries achieve better trading conditions with companies in developed countries, and promote improved social and environmental standards.

Businesses participating in the fair trade movement advocate the adoption of a price floor by paying higher prices to exporters to cover the costs of sustainable production and living costs of growers (Linton 2008). In addition, they ensure that health and safety standards are embedded in the production processes, children are protected from enforced labour, and producers may enjoy food security and diversification for themselves during lean unproductive months (Fairtrade UK 2019). The fair trade accreditation scheme also includes a ‘social premium’ that supports growers towards the development of their skills and knowledge and the improvement of their farming practices through a range of community projects and the use of environmental standards.

Johannessen and Wilhite (2010) analysed the fair trade market and found that most fair trade schemes are controlled by large multinational businesses selling products in consumer countries, which eventually acquire the largest share of economic income as well.

The 10 principles of fair trade

According to the World Fair Trade Organisation (WFTO 2016), in order to create a fairer world for everyone to live in, businesses must follow the 10 principles, below, in their day-to-day work and carry out monitoring to ensure that these are upheld:

Principle Further explanation
Principle 1. Create opportunities for economically disadvantaged producers Reduce poverty by making producers economically independent
Principle 2. Act with transparency and accountability Involve producers in important decision making
Principle 3. Trade fairly Trade with concern for the social, economic and environmental well-being of producers
Principle 4. Pay a fair price Pay producers a fixed price by mutual agreement, ensuring socially acceptable wages depending on the location
Principle 5. Ensure no child labour and forced labour Adhere to the United Nations Convention on children’s rights
Principle 6. Commit to non-discrimination, gender equity and women’s economic empowerment and freedom of association Respect the trade union rights and rejecting discrimination based on gender, religion or ethnicity
Principle 7. Ensure good working conditions Provide a safe and healthy working environment for producers and workers in line with the International Labour Organization conventions
Principle 8. Provide capacity building Seek to develop the skills of producers and workers so they can continue to grow and prosper
Principle 9. Promote fair trade Raise awareness for the need for greater justice in world trade by trading fairly with poor communities
Principle 10. Respect for the environment Care for the environment by maximising the use of sustainable energy and raw materials while minimising waste and pollution

(Adapted from WFTO 2017)

Fairtrade mark

According to the UK Fairtrade Organisation, the Fairtrade mark is a registered certification label for products sourced from producers in developing countries (Fairtrade UK 2019). The mark helps consumers to recognise products sourced in an ethical way.

In addition, the new Fairtrade Sourced Ingredients mark is used for one or two ingredients in a finished composite product (eg cocoa, sugar, cotton, flowers, vanilla and tea) across product ranges or whole businesses. Growers still receive protection of the fair trade minimum price and the premium, allowing them to choose how to invest in their community.

In both cases, businesses must apply for a licence in order to use the Fairtrade or the Fairtrade Sourced Ingredients mark on their approved products.

FairtradeThe core FAIRTRADE Mark Fairtrade markThe FAIRTRADE Sourced Ingredients Mark

(Images reproduced with the kind permission of the Fairtrade Organisation)

It is important to remember that there are many different organisations that make up the fair trade movement. Fairtrade UK is the only one of these that features the Fairtrade mark since organisations may be classed as ‘fair trade’, but not deliver the same benefits or cover the same areas as the Fairtrade mark. One example of this is environmental considerations.

Your task

Look for the WFTO label to identify three products from verified fair trade businesses. Select one of them and explain what actions the business has undertaken to audit itself and its suppliers against the 10 principles of fair trade.

Share your findings with your classmates in the comments section below.


References

CfD (2016) ‘Sourcing Locally’.Chefs for Development available from https://chefs4dev.org/index.php/sourcing-locally/ [8 July 2019]

CIPS (2009) ‘Sustainable Procurement Knowledge Summary’. CIPS Knowledge Works [online]. UK Chartered Institute of Procurement and Supply. available from https://www.cips.org/en-GB/knowledge/procurement-topics-and-skills/sustainability/sustainable-and-ethical-procurement/sustainable-procurement/ [8 July 2019]

Crone, M. (2002) ‘Local Sourcing by Multinational Enterprise Plants: Evidence from the UK Regions and the Implications for Policy’. Environment and Planning C: Government and Policy 20 (1), 131-149

Fairtrade UK (2019) ‘Fairtrade and Sustainability Standard of Living: Income and Food Security, Reduced Risk and Vulnerability’. London: Fairtrade Foundation

Johannessen, S., and Wilhite, H. (2010) ‘Who Really Benefits from Fairtrade? An Analysis of Value Distribution in Fairtrade Coffee’. Globalizations 7 (4), 525-544

Knowledge Works (n.d.) ‘Sustainable Procurement’. Knowledge Works [online]. UK Chartered Institute of Procurement and Supply. available from https://www.cips.org/en/knowledge/procurement-topics-and-skills/sustainability/sustainable-and-ethical-procurement/sustainable-procurement/ [8 July 2019] You will need to register with the CIPS to view the document

Linton, A. (2008) ‘A Niche for Sustainability? Fair Labor and Environmentally Sound Practices in the Specialty Coffee Industry’. Globalizations 5 (2), 231-245

Meehan, J., and Bryde, D. (2011) ‘Sustainable Procurement Practice’. Business Strategy and the Environment 20 (2), 94-106

USDA (2010) ‘Local Food Systems: Concepts, Impacts, and Issues (ERR-97)’. Economic Research Service/United States Department of Agriculture (USDA) [online]. available from https://www.ers.usda.gov/publications/pub-details/?pubid=46395 [8 July 2019]

WFTO (2017) ‘10 Principles of Fair Trade’ [online]. available from https://wfto.com/fair-trade/10-principles-fair-trade [8 July 2019]

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This article is from the free online course:

Sustainability and Green Logistics: An Introduction

Coventry University